FORT WORTH, Texas, Oct. 17 /PRNewswire-FirstCall/ -- AMR Corporation, the parent company of American Airlines, Inc., today reported a net profit of $175 million for the third quarter of 2007, or $0.61 per diluted share.
As disclosed in AMR's Sept. 21 investor update, the results for the third quarter of 2007 include the impact of a $40 million charge, or $0.13 per diluted share, to reflect an adjustment for additional salary and benefit expense accruals related to years 2003 through 2006 and the first six months of 2007.

The current quarter results compare to a net profit of $15 million for the third quarter of 2006, or $0.06 per diluted share. The year-ago results included a $99 million non-cash charge in Other Income (Expense) to reduce the book value of certain outstanding fuel hedge contracts.

"While record fuel prices in the third quarter were a reminder of the external challenges that we continue to face, we again demonstrated our ongoing progress by posting our sixth straight profitable quarter and our largest net profit in any third quarter since 2000," said AMR Chairman and CEO Gerard Arpey. "We continued to improve our balance sheet while investing in key customer service initiatives, including taking steps to renew our fleet, add new routes, and enhance several products and services. However, we must step up our continued focus on managing costs, work to improve our profit margins, and continue our momentum throughout 2007 and beyond."

Operational Performance

American's mainline passenger revenue per available seat mile (unit revenue) increased by 5.0 percent in the third quarter compared to the year-ago quarter.

Mainline capacity, or total available seat miles, in the third quarter decreased 2.8 percent compared to the same period in 2006, as the Company continued to flatten its schedule to more efficiently utilize its fleet and other resources.

American's mainline load factor -- or the percentage of total seats filled -- was a record 83.9 percent during the third quarter, compared to 81.7 percent in the third quarter of 2006. American's third-quarter yield, which represents average fares paid, increased 2.3 percent compared to the third quarter of 2006, its 10th consecutive quarter of year-over-year yield increases.

AMR reported third quarter consolidated revenues of approximately $5.9 billion, an increase of 1.7 percent year over year. Other revenues, including sales from such sources as confirmed flight changes, purchased upgrades, Buy-on-Board food services, and third-party maintenance work, increased 5.7 percent year over year to $352 million in the third quarter.

American's mainline cost per available seat mile (unit cost) in the third quarter increased 3.9 percent year over year, which was 0.8 percentage points higher than it would have been as a result of the $40 million charge to adjust salary and benefit expense accruals from prior periods. Approximately $30 million of the charge is attributable to years 2003 through 2006 and approximately $10 million is attributable to the first half of 2007.

Third quarter unit costs were also negatively affected by factors such as accelerated depreciation on assets being replaced through planned aircraft cabin refurbishment projects; certain investments to improve the customer experience; higher revenue-related expenses such as food and beverage and credit card fees; and weather cancellations in July.

Excluding fuel and the charge, mainline unit costs in the third quarter increased by 4.0 percent year over year. Arpey said that the Company continues working to achieve $300 million in targeted cost savings for 2007 and continues to focus on cost containment. Among recent examples, American earlier this month announced a consolidation of its reservations offices that will affect the Cincinnati Reservations Office (CRO), effective September 2008. While all of the CRO employees have been offered jobs within American's Reservations group, by consolidating its reservations operations American is able to reduce costs.

Balance Sheet Improvement

AMR continued to strengthen its balance sheet in the third quarter by further reducing debt and improving its liquidity position.

AMR ended the third quarter with $5.8 billion in cash and short-term investments, including a restricted balance of $447 million, compared to a balance of $5.5 billion in cash and short-term investments, including a restricted balance of $464 million, at the end of the third quarter of 2006.

AMR reduced Total Debt, which it defines as the aggregate of its long-term debt, capital lease obligations, the principal amount of airport facility tax-exempt bonds, and the present value of aircraft operating lease obligations, to $16.6 billion at the end of the third quarter of 2007, compared to $19 billion a year earlier. AMR reduced Net Debt, which it defines as Total Debt less unrestricted cash and short-term investments, from $14 billion at the end of the third quarter of 2006 to $11.2 billion in the third quarter of 2007.

As a result of scheduled principal payments as well as incremental efforts to strengthen its balance sheet, AMR's net interest expense for the first nine months of 2007 was $133 million lower than in the same period in 2006, a 23 percent reduction.

AMR contributed $200 million to its defined benefit pension plans in the third quarter, as the Company continues to meet this important commitment to its employees. With the third quarter contribution, the Company has contributed $380 million to these plans in 2007, meeting its projected commitment for the year. The Company has contributed nearly $2 billion to these plans since 2002.

Third Quarter and Recent Highlights

-- In September, as part of its fleet renewal strategy and efforts to
improve fleet fuel efficiency by more than 20 percent by 2020,
American accelerated three Boeing 737s for delivery in the second half
of 2009. Those three 737s are part of American's announced plan to
accelerate the deliveries of 47 previously ordered 737s into the
2009-2012 timeframe. In addition, on Oct. 1 American notified Boeing
that it was exercising an option to purchase an additional 737 for
delivery in early 2009, representing its first 737 commitment in
addition to those 47 aircraft. Including the four 737s cited today,
American so far has scheduled delivery of a total of 13 737s
throughout 2009.
-- American announced it will begin nonstop service from Chicago O'Hare
International Airport to Moscow's Domodedovo International Airport on
Monday, June 2, 2008. From Chicago, American is -- or soon will be --
providing links to the world's key developing economies in Russia,
China, and India as well as the established markets of Japan, Europe
and Latin America.
-- American introduced DealFinder, a downloadable, computer desktop tool
that offers customers exclusive, targeted, discounted fares to
locations throughout American's network. The tool, available athttp://www.aa.com/dealfinder, searches for the lowest fares, allowing
customers to spend less time planning travel.
-- American Airlines Vacations launched its redesigned Web site that
enhances the customer's shopping and booking experience on
AAVacations.com. The enhancements provide customers with convenient
and flexible options when customizing vacation plans.
-- American continued to grow and enhance its New York service into
Europe, announcing that it will begin two new routes early next year
to Milan, Italy, and Barcelona, Spain, from John F. Kennedy
International Airport (JFK), as well as a second daily roundtrip
between JFK and London's Stansted Airport. American also unveiled its
state-of-the-art, $1.3 billion terminal at JFK as part of its
continuing commitment to become the airline of choice in the New York
market.
-- AMR's wholly-owned subsidiary, American Eagle Airlines, Inc., made a
$32 million aircraft debt prepayment that brought AMR's prepayment of
debt on its Canadair regional jets to $159 million this year. The
final payment released 10 CRJ-700 aircraft that were used to secure
the debt. Additionally, on Oct. 1 AMR said that American intends to
prepay $545 million in aircraft debt in the fourth quarter of 2007.
The prepayment is expected to initially eliminate approximately
$25 million of annual net interest expense and release 16 aircraft
used to secure the loan.
-- American, American Eagle, and Texas Aero Engine Services Limited
(TAESL), an affiliated engine repair facility, received the coveted
Federal Aviation Administration's Diamond Award for excellence in
training their Aviation Maintenance Technicians (AMT)